Ore selection to maximise value

Abstract

Ore selection is generally aimed at producing product with a consistent target grade matching a perceived market requirement. A composite selection criterion ‘Comp’ (a linear function of the grade vector) can be used to maximise ore tonnage at a specified target grade (in Fe and contaminants) extractable from a block model. The blocks correspond to the selective mining units, with grades interpolated from diamond drill-hole data. An iterative procedure has been developed to identify the coefficients and cut-off value for the composite function ‘Comp’, maximising potential ore tonnage at target grade. Commonly, target grade is pre-determined by marketing. However, there is no guarantee that maximising ore tonnage at a specified target grade maximises the potential value of the mine. If the value of ore could be expressed as a linear function of the grade components, then these coefficients would be appropriate for the selection criterion ‘Comp’; the cut-off value for ‘Comp’ would correspond to the marginal cost of production; all blocks with a ‘Comp’ score above the cut-off would be classified as ore, and the cumulative grade of these ore blocks would be the average product grade over the life of the mine. Unfortunately, no such value function for iron ore is generally available. Methods for estimating the value function are discussed, using the spot price and sensitivities based either upon operational tolerances for Fe and the contaminants or upon published price differentials. This approach has been applied to an anonymous Pilbara deposit with about one million blocks averaging 1.1 kt. It is shown how the optimal target grade, cut-off grade and maximum tonnage can all be explored as a function of marginal cost and iron ore price. Alternatively, given marginal cost and an iron ore price, the effects of changing the tolerances (and therefore the relative costs of the contaminants) can also be explored. The procedure can enable informed decision-making for an iron ore mine. Rather than setting final policy for the entire life-of-mine, it enables target grades and tonnage estimates to be revised by re-computation as the mine life proceeds, to recognise changes in market conditions and knowledge about the resource. It should be emphasised that this paper is concerned with ore selection rather than ore sequencing. Appropriate ore selection is a necessary but not sufficient condition for maximising value. Having identified the set of blocks that potentially maximise value, the sequence in which they are mined will present a trade-off between producing at constant grade and extracting high-value ore early. The sequencing issue is not considered here. It is shown that optimum ore selection for an open-pit mine is independent of any consideration of discount rates, although ore sequencing will depend upon the time value of money if the product grade is to vary across time. Although the study considers an iron ore deposit, the method can be extended to any open-pit mining where ore value can be expressed as a linear composite of multiple grade components.